PrivateBancorp Reports First Quarter Results

CHICAGO, April 26 /PRNewswire-FirstCall/ -- PrivateBancorp, Inc. (Nasdaq: PVTB) today reported a net loss of $24.3 million, or $0.35 per diluted share, for the first quarter 2010, compared to net income of $4.8 million, or $0.14 per diluted share, for the first quarter 2009.

"While there is still credit uncertainty, we are encouraged by the slowing pace of our non-performing asset growth and continue to actively manage through the challenges of the cycle," said Larry D. Richman, President and Chief Executive Officer, PrivateBancorp, Inc. "Non-performing asset growth moderated due largely to our focused efforts to address weaker credits as we bolstered our workout teams and repositioned resources."

"Our capital position and business fundamentals remain solid," Richman continued.  "Supported by our strong balance sheet, we are working with new and existing clients as they begin to reinvest in their businesses.  As the economy recovers and credit trends improve over time, we are positioned to return to profitability, leveraging our core earnings capacity and strong commercial banking franchise."

First Quarter Results

• Non-performing assets at quarter end were $442.0 million, compared to $436.9 million at year-end.  Provision for loan losses for the first quarter 2010 was $72.1 million and net charge-offs were $56.9 million, resulting in an allowance for loan losses of $236.9 million or 2.66 percent of total loans.
• Net revenue totaled $114.3 million and operating profit was $40.9 million for the quarter.  Net interest income and net interest margin remained strong at $98.3 million and 3.36 percent.
• Deposits grew to $10.6 billion with a 6 percent increase in client deposits from year end.  Total loans were $8.9 billion, reflecting lower overall credit demand, with paydowns and payoffs offsetting new loan growth. New loan growth was approximately $200 million in the quarter.
• Solid capital position reflected by total risk-based capital ratio of 14.89 percent, Tier 1 capital ratio of 12.47 percent, Tier 1 common capital ratio of 7.85 percent, and tangible common equity ratio of 6.86 at quarter end.

Credit Quality

The Company continued to manage the portfolio through the difficult credit climate with ongoing disciplined workout and asset review, and heightened focus on addressing the challenges of the commercial real estate sector. Non-performing assets increased at a slower rate than in the previous quarter, indicating early signs of stabilization.  While risk is still evident given the broader credit environment, management anticipates continued moderation of non-performing asset growth in the second quarter.  Overall, commercial and industrial sector performance appears to be strengthening slightly, in line with early signs of economic recovery.  However, the commercial real estate sector continues to show stress.

The first quarter 2010 provision for loan losses was $72.1 million, compared to $17.8 million in the first quarter 2009 and $69.5 million in the fourth quarter 2009.  The allowance for loan losses as a percentage of total loans was 2.66 percent at March 31, 2010, compared to 1.50 percent at March 31, 2009, and 2.44 percent at December 31, 2009.  Allowance for loan losses, as a percentage of non-performing loans, was 62 percent in the first quarter 2010, compared to 78 percent in the first quarter 2009 and 56 percent in the fourth quarter 2009.  

Net charge-offs increased to $56.9 million for the quarter ended March 31, 2010, up from $3.5 million for the first quarter 2009 and $40.6 million for the fourth quarter 2009. Approximately $31.9 million of first quarter net charge-offs were related to commercial real estate and construction loans.

The Company had $442.0 million in total non-performing assets at March 31, 2010, compared to $191.6 million at March 31, 2009, and $436.9 million at December 31, 2009.  Approximately 71 percent of non-performing loans at March 31, 2010, were commercial real estate and construction loans. Non-performing assets to total assets were 3.45 percent at March 31, 2010, compared to 1.85 percent at March 31, 2009, and 3.62 percent at December 31, 2009.

Credit quality results exclude $468.9 million in covered assets as of the end of first quarter, referring to certain assets acquired through an FDIC-assisted transaction that are subject to a loss-sharing agreement.

Operating Performance

The Company continues to generate strong core performance as it leverages its investment in people and infrastructure. New business development remains steady with client acquisition, disciplined pricing, and increased cross sell driving stable revenue.

Net revenue was $114.3 million in the first quarter 2010, up from $88.3 million in the first quarter 2009 and relatively flat compared to $114.8 million in the fourth quarter 2009.  Operating profit (the sum of net interest income and non-interest income less non-interest expense) was $40.9 million in the first quarter 2010, compared to $30.2 million in the first quarter 2009 and $46.3 million in the fourth quarter 2009.  Operating profit was impacted by modestly reduced loan levels and a normalized incentive compensation accrual in the first quarter 2010.

Net interest income was $98.3 million in the first quarter 2010, compared to $63.9 million for the first quarter 2009 and $99.6 million in the fourth quarter 2009.  Net interest margin (on a tax equivalent basis) was 3.36 percent for the first quarter 2010, compared to 2.68 percent in the first quarter 2009 and 3.48 percent in the fourth quarter 2009.  Excluding accretion from the Founders Bank transaction in the first and fourth quarters, net interest margin was relatively flat on a comparison basis. The strength of the net interest margin reflects increased client deposits and the contribution of the Founders Bank transaction.

Non-interest income was $15.1 million in the first quarter 2010, compared to $23.6 million in the first quarter 2009 and $14.3 million in the fourth quarter 2009. Treasury management income increased to $3.6 million in the first quarter 2010, up from $1.6 million in the first quarter 2009 and $3.4 million in the fourth quarter 2009, reflecting increased cross sell into our existing commercial base. Capital markets income in the first quarter 2010 decreased to $278,000, down from $11.2 million in the first quarter 2009 and $2.4 million in the fourth quarter 2009.  Capital markets income was impacted by a $1.3 million negative credit valuation adjustment, reduced originations, and the interest rate environment.  

Mortgage banking income was $2.1 million in the first quarter 2010, compared to $2.2 million in the first and fourth quarters 2009.  Other income, service charges and fees were $4.2 million in the first quarter 2010, compared to $3.6 million in the first quarter 2009 and $1.9 million in the fourth quarter 2009, which included a $4.2 million loss on loan dispositions.

Wealth management fee income was $4.4 million in the first quarter 2010, up from $3.8 million in the first quarter 2009 and $4.1 million in the fourth quarter 2009.  Assets under management and administration at March 31, 2010, were $4.0 billion, compared to $3.2 billion at March 31, 2009, and $4.0 billion at December 31, 2009.

Expenses

The Company continued to closely manage costs, resulting in lower expenses quarter-over-quarter, excluding the impact of the normalized incentive compensation accrual in the first quarter 2010.  Non-interest expense was $73.4 million in the first quarter 2010, compared to $58.1 million in the first quarter 2009 and $68.5 million in the fourth quarter 2009.  The efficiency ratio was 64.2 percent in the first quarter 2010, compared to 65.8 percent in the first quarter 2009 and 59.7 percent in the fourth quarter 2009.  

Balance Sheet

Total assets increased to $12.8 billion at March 31, 2010, up from $10.4 billion at March 31, 2009, and $12.1 billion at December 31, 2009.  

Consistent with the industry, loan growth has slowed due to reduced borrowing demand.  Total loans decreased 1.7 percent, with paydowns and payoffs offsetting new originations and utilization of existing lines.  Total loans were $8.9 billion at the end of the first quarter 2010, compared to $8.5 billion at the end of the first quarter 2009 and $9.1 billion at year-end 2009.  Commercial and industrial loans accounted for 52 percent of total loans, while commercial real estate loans were 32 percent at the end of the first quarter 2010.

The Company is actively expanding client relationships, as reflected by the 6 percent increase in client deposits in the quarter.  Client deposit growth continued to outpace loan growth, leading to stronger liquidity.  Total deposits were $10.6 billion at March 31, 2010, compared to $7.8 billion at March 31, 2009, and $9.9 billion at December 31, 2009.  Client deposits increased to $9.9 billion at the end of the first quarter 2010, up from $6.9 billion at the end of first quarter 2009 and $9.3 billion at year-end 2009.  Client deposits at March 31, 2010, included $1.9 billion in non-interest bearing deposits.  Brokered deposits (excluding $1.1 billion in client CDARS® deposits) were 7 percent of total deposits at the end of the first quarter 2010, compared to 11 percent a year ago and 6 percent at the end of the fourth quarter 2009.  

Funds borrowed, which include federal funds purchased, FHLB advances, trust preferred securities, borrowings under the Company's credit facilities, and convertible senior notes, was $740.2 million at March 31, 2010, down from $1.5 billion at March 31, 2009, and $748.0 million at December 31, 2009.

The Company's investment securities portfolio was $1.8 billion at March 31, 2010, compared to $1.4 billion at March 31, 2009, and $1.6 billion at December 31, 2009.  Net unrealized gains were $53.7 million, compared to $54.2 million at the end of the first quarter 2009 and $44.8 million at the end of the fourth quarter 2009. The Company's securities portfolio is primarily composed of U.S. government agency backed mortgage pools, agency collateralized mortgage obligations, and investment grade municipal bonds.

Federal funds sold and other short-term investments increased to $1.1 billion in the first quarter 2010, up from $83.6 million in the first quarter 2009 and $218.9 million in the fourth quarter 2009, as a result of increased deposit inflows.  Strong liquidity results in near-term pressure on interest income until it is deployed into higher earning assets.  

Capital

The Company continued to manage within its capital base.  As of March 31, 2010, the Company had a total risk-based capital ratio at 14.89 percent and Tier 1 risk-based capital ratio at 12.47 percent, exceeding the minimum well-capitalized thresholds of 10 percent and 6 percent, respectively. The Company's Tier 1 common capital ratio was 7.85 percent and the tangible common equity ratio was 6.86 percent at the end of the first quarter 2010.

Quarterly Conference Call and Webcast Presentation

Interested parties are invited to listen to our quarterly conference call on Monday, April 26, 2010, at 10 a.m. CDT. The call may be accessed by telephone at (888) 782-9127 (U.S. and Canada) or (706) 634-5643 (International).  A live webcast of the call can be accessed on our website at www.theprivatebank.com by visiting the Investor Relations tab under the About Us section. A rebroadcast of the call will be available beginning approximately two hours after the call until midnight on May 2, 2010, by calling (800) 642-1687 (U.S. and Canada) or (706) 645-9291 (International) and entering passcode #67997323.

About PrivateBancorp, Inc.

PrivateBancorp, Inc., through its subsidiaries, delivers customized business and personal financial services to middle-market companies, as well as business owners, executives, entrepreneurs and families in all of the markets and communities we serve. As of March 31, 2010, the Company had 34 offices in 10 states and $12.8 billion in assets.  Our website is www.theprivatebank.com.

Forward-Looking Statements

Statements contained in this news release that are not historical facts may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could cause actual results to differ from those reflected in forward looking statements include, but are not limited to: unforeseen credit quality problems or further deterioration in asset quality that could result in charge-offs greater than the Company has provided for in its allowance for loan and lease losses; continued declines in commercial real estate values in our market areas; unanticipated withdrawals of significant client deposits; the lack of sufficient or cost-effective sources of liquidity or funding; difficulty in raising capital on acceptable terms when necessary or required; an inability to retain key personnel; potential for significant charges if our deferred tax or goodwill assets suffer impairment; unanticipated changes in interest rates or significant tightening of credit spreads; prolonged negative economic conditions or slower than anticipated economic recovery; legislative or regulatory changes, particularly changes in the regulation of financial services companies and/or the products and services offered by financial services companies and regulation of banks participating in the TARP Capital Purchase Program; adverse developments in the regulatory examination or regulatory enforcement environment; or failures or disruptions to the Company's data processing or other information systems.  These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on our forward-looking statements. The Company assumes no obligation to update publicly any of these statements in light of future events unless required under the federal securities laws.

Non-GAAP Measures

This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures.  The Company believes that these non-GAAP financial measures provide information useful to investors in understanding the underlying operational performance of the Company, its business, and performance trends and facilitates comparisons with the performance of others in the banking industry. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconcilement to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Editor's Note: Financial highlights attached.  

SOURCE PrivateBancorp, Inc.